Bitcoin - A Numbers Game

LOTTERY - 77, 77, 79. This may be a strange way to start a post, but those three numbers are all that matters in the world of Bitcoin at the moment. So what are these numbers? Some sort of new sequence relating to a technological breakthrough in the cryptocurrency? Nope. Those are the current readings of BTCUSD’s daily, weekly and monthly RSIs.

OSCILLATOR - The Relative Strength Index (RSI) is a technical indicator in the form of an oscillator that gauges the level of extension in a market. Readings of 30-70 are considered normal, while anything that deviates on either side is considered to be overextended and at risk for reversal.

MONTHLY - Now it isn’t a common event to see such readings extended across all major time frames and with the monthly chart the most extended of the group, tracking just around super overbought readings of 80, the likelihood that we see another big pullback using this analysis is quite high, even amidst news of the potential launch of a Bitcoin ETF in the US.

LEVELS - Bitcoin has finally managed to break through the 1163 2013 top, trading a record 1220 thus far, but at the same time, we would caution against any expectation for the market to be able to sustain any rallies beyond 1200.

Not sure $BTCUSD will be able to fly much higher. Via @joelkruger Tweet This

OUTLOOK - Instead, consider the possibility for a more significant pullback into the 700s over the coming weeks, an area that we project would reflect healthier technical readings and a more appropriate valuation for the cryptocurrency, which is still in its infancy and still trying to figure it place in this world. A daily close below 1100 will strengthen this outlook.

About Joel Kruger

I am a seasoned currency strategist and professional trader. I have worked for investment banks, fixed income research advisories and a leading foreign exchange brokerage. In 2012, I set up JKonFX.com to offer my daily insights and trading strategies.